Rise in Social Expenditure Leveling off

On the basis of the European System of Integrated Social Protection Statistics (ESSPROS), developed by the Statistical Office of the European Community, social expenditure for all EU-countries have been newly recorded on a standardized base, thereby enabling meaningful comparative analysis. According to this new system, Austrian social expenditure in 1995 totaled ATS 694 billion, equivalent to 29.5 percent of GDP. Since 1980, current social protection expenditure rose by 157 percent and as a ratio of GDP by 2½ percentage points. During the 1980's, changes in the social outlays/GDP ratio were dominated by cyclical variations: it rose over the period of sluggish growth until 1987, but fell back with the subsequent recovery – eventually even below the 1980 level. In the early 1990's however, it ratcheted upwards, due to a number of discretionary raises in benefits such as an extension of paid maternity leave higher pension entitlements for women, family tax credits and nursing care benefits. In 1995, the rise in the social expenditure/GDP ratio leveled off, despite a cyclical weakening accompanied by a rise in unemployment. Also in 1996, the ratio may have remained flat in view of measures to cut the government deficit. Since 1980, the expenditure components showing the strongest increase are unemployment benefits (+660 percent rise) and invalidity pensions (+225 percent). Old-age pension outlays (+175 percent) also expanded above-average because of discretionary benefit increases and the system maturing (with new retires having acquired progressively longer entitlement periods). The relative importance of social expenditure in Austria is similar to that in other European countries with comparable economic and social structure. As a proportion of GDP, it is slightly above the EU-average for 1994, which is dampened by the absence of Sweden (prior to accession) and the very low level of social spending in the southern European countries. For the EU as a whole, the ratio has moved up by 4¼ percentage points since 1980; apart from a catching-up effect in southern Europe, strong advances in the U.K. (+6 percentage points), Denmark and France (+5 points each) have contributed to this development. The structural composition of social outlays in Austria differs markedly from the EU-average insofar, as old-age pensions (Austria 49 percent, EU 44 percent) and family subsidies (11 versus 8 percent) claim a much larger share, whereas the share of spending on unemployment benefits (6 against 9 percent) as well as on sickness and invalidity payments (33 versus 35 percent) is distinctly lower in Austria than on the average of EU countries.